Acquisition of 100% Stake in Xinlianzifu
Entering Government Antitrust Regulations One After Another
[Asia Economy Beijing=Special Correspondent Jo Young-shin] Huawei is entering the Chinese mobile payment service market. It is expected that the mobile payment market, which is virtually monopolized by Alibaba Ant Group's Zhifubao (Alipay) and Tencent's Weixin Zhifu (WeChat Pay), will experience significant changes.
According to Chinese media such as Pengpai on the 29th (local time), Huawei acquired 100% of the shares of Shenzhen electronic payment service company Xunlian Zhifu in Guangdong Province, obtaining a mobile payment license. Xunlian Zhifu was established in 2013 with a capital of 200 million yuan and holds a license to provide electronic payment services throughout China.
◇ Chinese IT Giant Huawei Joins the Payment Market
It is estimated that there are over 200 million Huawei smartphone users in China. The Chinese smartphone industry analyzes that Huawei can secure 200 million customers just by managing its existing user base, or "home rabbits." A Chinese mobile phone industry official explained, "Huawei smartphone users are an advantage for Huawei when entering the mobile payment market."
Chinese media reported that Huawei has shown interest in the mobile payment market by jointly developing near-field communication (NFC) payment technology with more than 20 commercial banks including Industrial and Commercial Bank of China, Bank of China, China Construction Bank, and Bank of Communications since 2016.
The industry expects Huawei to adjust its pace considering the Chinese government's antitrust regulations and market conditions. Xiaomi also acquired 100% of the shares of Zhifu Ruitong Holdings, which holds a license, in 2019, so it can participate in the mobile payment market at any time, according to Chinese media.
◇ China Strengthens Antitrust Regulations
Huawei's acquisition of Xunlian Zhifu draws more attention as it comes at a time when the Chinese government is strengthening antitrust regulations on IT platform companies.
The absolute leader in the Chinese mobile payment market is Alipay. Alipay, operated by Ant Group, Alibaba's financial subsidiary, holds a market share of 55.4% (as of 2019). The second-largest market share belongs to WeChat Pay at 38.5%. The combined market share of the two companies is 93.9%. It is estimated that there are over 900 million users of Alipay and WeChat Pay in China.
Recently, the Chinese government has been strengthening regulations against monopolies in the mobile payment market. According to the draft regulations for non-bank payment institutions announced by the People's Bank of China in January, if a single entity's market share exceeds 50% in the online and mobile payment market, it becomes subject to antitrust investigation.
Also, if the combined market share of two entities exceeds two-thirds, or if three entities' combined share exceeds three-fourths, they become subject to investigation. If deemed monopolistic, the People's Bank of China, together with the State Council, can investigate the entity and may request the company to be split. According to this draft, Alipay is currently in a monopolistic state, and WeChat Pay is also monopolistic based on the two-entity standard. Ultimately, this opens new opportunities for companies newly entering the market.
◇ Payment Market Entering a Warring States Period
Following these prospects, companies entering the payment market are emerging one after another. E-commerce company JD.com, ride-sharing company Didi Chuxing, and food delivery service company Meituan have all entered the mobile payment service market. The U.S. online and mobile payment company PayPal recently acquired 100% of the shares of Chinese electronic payment company GoPay and is expected to officially enter the Chinese market soon.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
